Economic outlook

The Economic Outlook series provides monthly updates on the outlook for the global and US economies, and quarterly updates for China and Canada.



US Economic Outlook

The US economy continues to advance at a solid pace. Real GDP growth for 2Q18 was revised up a tick to 4.2% (seasonally adjusted annual rate), and a strong consumer confidence index and manufacturing PMI suggest above-trend growth in 3Q18. Consumer spending is further supported by sustained labor market strength and healthy household saving rates. Overall, we expect the economy to grow by 2.9% this year, before slowing to 2.2% in 2019. On the price front, inflation is firming up. We expect two additional Fed rate hikes this year. The biggest downside risks to our benign baseline arise from trade policy.

Global Economic Outlook

Global economic growth continues at a level above potential, but peak growth is now in the rear-view mirror and regional divergence is rising. Emerging markets in particular face a number of idiosyncratic crises and overall tighter financial conditions. US trade policy remains a key downside risk, especially vis-à-vis China.


China Economic Outlook Quarterly

Growth of the Chinese economy remained solid at 6.7% in 2Q18, marginally lower than 1Q18 but the risk of a significant growth rate downshift in the second half has increased. Despite fairly resilient domestic foundamentals, weakening external demand amid escalating trade tension with the US is threatening the growth outlook. Our baseline scenario of a managed slowdown in 2H18 rests on the assumption that fiscal spending will increase and monetary policy will turn more growth-supportive in the coming months. We have revised the probability of a China hard-landing to 15% from 10%, with a stable outlook, mainly on account of increasing uncertainty arising from intensifying Sino-US trade tension.


Canada Economic Outlook

The Canadian economy continues to operate near full capacity, with a trend-like advance of 2.0% expected in 2018. Although job growth has slowed this year, some moderation is expected at this point in the cycle. Meanwhile, inflation pressures are rising, with core readings right around the midpoint of the Bank of Canada's (BoC) target range, and wage growth at its fastest in more than five years. Furthermore, higher oil prices will push up headline inflation in the coming months. The BoC revised up their view on potential growth for 2018 in April, indicating that the economy has a bit more room to run, but capacity utilization rates are at decade highs and inflation expectations in the latest Business Outlook Survey moved up moderately. Thus, the BoC is projected to continue on a gradual path of rate hikes, with the next move in July, followed by one more later in 2018.


Global Economic Outlook and Scenarios 2018

Global Economic Outlook and Scenarios

We expect a continuation of strong global economic growth. Macroeconomic risks remain broadly balanced – even after upward revisions to our baseline scenario over recent months. Inflation and sovereign bond yields are expected to increase moderately over the next two years.